Thursday, March 24, 2016

The economy is still in the midst of its weakest recovery ever. But the news is not all bad: the chances of a worker being fired today are lower than at any time in the past 50 years.

As the chart above shows, the 4-week moving average of initial claims for unemployment has fallen to its lowest level since 1973.

As a percent of the workforce, initial claims are the lowest they have been since records were first kept in 1967. In the past 4 weeks, initial claims dipped to a mere 0.18% of the 143.6 million people working.

11 comments:

Scott, I would only add to this that an historically low "inflow rate" -- that is, the rate at which employed people flow into unemployment -- has a dark side. It can imply that the labor market is sclerotic. I think that is the case today. My evidence is that the "outflow rate" -- that is, the rate at which unemployed people can flow to employment -- is also at historic lows. Thus both joblessness and jobfulness are roach motels -- hard to get in, impossible to get out. I would rather see a more venturesome economy with more churn.

I think Donald Luskin's comments make sense. I would rather see a lot more real growth, vivacity, and job churn.

Some of this is the extensive stipulations on property development we see in so many counties and cities. There are artificial housing shortages in California, and that constrains business development. No one can move to CA to take a job, when they see the price of housing.

But starting up a business in Atlanta, and no one talented from CA is going to move there. The country is ossifying, in part due to property zoning.

Extensive monthly "disability payments" though the VA and SSDA make matters worse.

But, everyone is a pinko greenie-weenie in their own neighborhood. I see no solution in the short-term.

Don: thanks for your comments, and for pointing this out. I share your concern with the overall health of the economy and the labor market. Things could and should be a lot better. Job security is small recompense for a lousy economy which could be a lot healthier with the right policies.

The fix is easy (lower corporate taxes and increased infrastructure spending on the federal level), if only partisan obstructionism wouldn't interfere with a common sense compromise. The unwillingness to accept a half a loaf is what is killing this country.

The best way to understand today's economy is to revisit the US economy between 1930 and 1040. These are time in which we live today with one big caveat -- $19 trillion in national debt plus massive trade imbalances. Sadly, the economy has no hope of returning to real prosperity until the debt and trade deficits are resolved back to positive.

If I were a young person, I would probably be advocating for laws to move 100% of all qualified plan assets in the US into treasuries together with a required annuitization of qualified plan withdrawals based on an age 95 mortality schedule. This would leverage the only remaining pockets of wealth in the US economy that are sufficient in size to fix the national debt problem.

The second measure would be to outlaw imports of automobiles, consumer electronics, and energy. The result would be to instantly refocus US industry on filling domestic demand with new manufacturing, as well as to get massively focused on exports for the first time in a century.

All of the above is spelled, T-R-U-M-P.

Again, the above would be what I would advocate for if I were a young person with nothing to lose. I would be hurt by the above just life everyone else my age or older.

The future of politics in the US will not be between races and genders, but between generations. Watch and learn..

PS: Adding to the above, the imposition of capital flight laws would be required as well, such as a 50% duty on dollars carried or transmitted out of the country -- all of are attractive to millennials, who are now the largest generation cohort in the US...

The trade deficit is a non-problem. All the dollars that pay for our trade deficit must be recycled here in the form of investments (i.e., a trade deficit is always offset by a surplus on the capital account). Trying to "fix" our trade deficit with import tariffs or capital controls would be a terrible idea since it would only increase the cost of many things and thus reduce our standard of living.

The national debt is currently $13.9 trillion, or about 75% of GDP. As such it is not an insurmountable problem. It is a problem nonetheless because it represents money that the federal government has spent that would have been more profitably invested and/or spent by the private sector.

Of course, if entitlement programs are not reformed, we face an escalating national debt burden that at some point would become unsustainable.

Notice too that all economies with greater GDP/capita are significantly smaller. In some cases they are oil rich countries while in other situations they are known banking havens. Difficult to envision the US moving much higher up in the ranking.

So, I think the question shouldn't be what's wrong with the US economy as much as how might we mess it up?